The Permian Basin is currently the fastest-growing oil location in the United States with many drillers wanting to reap the rewards the location has to offer. Currently, both Exxon Mobil Corp. and Chevron Corp. are in bids being held to purchase Endeavor Energy Resources LP. Controlled by the founder’s family, advisors recommended that the Stephens hear out inquiries from interested parties for the company.
Whichever company acquires the land, would have exclusive rights to drill on 329,000 net acres of land. The company is estimated to be worth 15 billion dollars and would rank in the top 10 deals ever processed for a privately held energy business.
Exxon Mobile Corp. and Chevron Corp. aren’t the only ones interested in the company. Many are looking to increase their ownership as production increases surge due to rising oil prices. Heading into December, oil production is predicted to grow to 3,695 thousand bpd (barrels per day), up 63,000 barrels over November. Drillers are flocking to the location, yet the issues they face is the lack of infrastructure and power transmission to the area. Without an adequate grid set in place, the amount of electricity needed to drill to complete work is not being met.
In the last two to three years, electricity needs in the area have increased by 79%, while in other locations it has surged 400%. The Permian power grid is unable to handle the amount of electricity that is required to power oil production efficiently. Even with most companies using diesel engines to power the larger equipment on site, such as fracking pumps and drilling rigs, the most significant operating expense regarding power demand is coming from the drilled wells.
Many companies are now looking toward finding alternative solutions to power their equipment. Some have turned to renewable resources, such as wind and solar energy, while others are looking to gas-powered compressors. Many like this option because it allows companies to use access gas in the area to power the compressors. Those that have looked at using renewable energy find that using solar and wind are too expensive and are unable to create consistent power to the equipment that they would use.
Either way that you look at it, many companies are standing to lose money because they are unable to work to their fullest extent. Noble Energy, for example, understands the problems that are currently occurring in the area and are looking to implement electrification projects in the locations so that electricity reliability can be improved.
If any company wants to purchase additional stacks in the Permian Basin, they must be prepared to deal with the power shortage they will face.